What is the VAT Cash Accounting Scheme: A Treasury Management Mechanism

The general Value Added Tax (VAT) scheme stipulates that the tax becomes due, in most cases, on the date of invoice issuance or the date of completion of services or delivery of goods, whichever occurs first. This means that if a company issues an invoice in January and the respective client only makes payment in June, the company is obliged to remit the corresponding VAT to the State in March (in the case of a monthly scheme), long before it has actually received the amount from the client.

This situation creates significant pressure on companies' cash flow, especially for Portuguese Small and Medium-sized Enterprises (SMEs), which often operate with extended payment terms, ranging from 60 to 120 days or even more. Essentially, the company is financing the State with a tax it has not yet received, compromising its working capital and liquidity.

It is precisely to mitigate this problem that the cash accounting scheme, regulated by Decree-Law no. 71/2013, of 30 May, emerges. This scheme reverses the traditional logic of VAT exigibility, determining that VAT only becomes due upon actual receipt of invoices from clients. Similarly, the deduction of input VAT on purchases and expenses is only permitted upon actual payment to suppliers. This mechanism aims to align the exigibility and deductibility of VAT with the company's real financial flows, providing significant relief in treasury management.

The cash accounting VAT scheme is, therefore, a strategic tool that allows companies to manage their cash flow more efficiently, avoiding the advance payment of taxes on unrealised revenues. It is particularly beneficial for companies that provide services or sell on credit and face regular challenges with payment terms, as is common in sectors that transact with large companies or public entities.

The New Threshold of €2,000,000 in 2026: An Expanded Opportunity

One of the most relevant and impactful changes for the VAT Cash Accounting Scheme was the increase in its eligibility threshold. Historically, the scheme was limited to companies with an annual turnover not exceeding €500,000. This limit, while useful, excluded a considerable portion of SMEs that, despite having a higher turnover, continued to face cash flow challenges. From 1 July 2025, Decree-Law no. 34/2025, of 15 May, changed this reality.

With the threshold rising to €2,000,000, the vast majority of Portuguese Small and Medium-sized Enterprises now have access to this scheme. This measure represents a recognition by the legislator of the cash flow difficulties affecting a broader spectrum of companies, allowing a significantly larger number of taxpayers to benefit from the advantages of cash accounting VAT.

Many companies that, in the past, were excluded from this scheme for having exceeded the previous limit of €500,000, should now — and it is strongly recommended that they do so — re-evaluate their situation and consider joining in October 2026, so that the effects take place from 1 January 2027. This re-evaluation is crucial for optimising financial management and business liquidity. The decision to join should be weighed considering the company's revenue and payment structure, as detailed in the following sections.

It is important to note that, although the threshold has changed, the fundamental principles of the scheme, such as VAT exigibility upon receipt and the maximum deferral limit of 12 months after the invoice, remain unchanged. These characteristics are essential for understanding the operation and practical implications of the scheme.

Practical Operation of Cash Accounting VAT: Examples and Calculations

To illustrate the fundamental difference between the general VAT scheme and the cash accounting scheme, let's consider some practical examples with numerical calculations.

Example 1: Service Provision with Payment Delay

A consulting company, which has joined the cash accounting VAT scheme, issues an invoice for €10,000.00 + VAT at the standard rate of 23% (€2,300.00) on 10 January 2026, for services rendered. The client, a large company, has a payment term of 120 days and only makes payment on 20 May 2026.

• Under the General VAT Scheme:
  • The invoice is issued on 10 January 2026.
  • The VAT of €2,300.00 becomes due in January.
  • The company, being on the monthly scheme, would have to include this VAT in the periodic declaration for January, to be submitted by 20 March 2026.
  • The payment of VAT to the State (€2,300.00) would be made by 25 March 2026.
  • The company would be financing the State with €2,300.00 for approximately four months, as it would only receive the amount on 20 May.
• Under the Cash Accounting VAT Scheme:
  • The invoice is issued on 10 January 2026, but VAT is not yet due.
  • The client pays the invoice on 20 May 2026. At this point, the company issues a receipt.
  • The VAT of €2,300.00 becomes due on 20 May 2026.
  • The company includes this VAT in the periodic declaration for May, to be submitted by 20 July 2026.
  • The payment of VAT to the State (€2,300.00) would be made by 25 July 2026.
  • In this scenario, the company only remits VAT to the State after receiving it from the client, relieving its cash flow.

Example 2: The 12-Month Limit and Irrecoverable Invoices

A construction company, operating under the cash accounting VAT scheme, issues an invoice for €25,000.00 + VAT (23% = €5,750.00) on 15 February 2026. The client, who is in financial difficulties, never makes payment.

• During 2026: VAT is not due, as there has been no receipt.
• On 15 February 2027: The "12-month limit" comes into effect. Even without client payment, the VAT of €5,750.00 becomes due on this date.
• The company will have to include this amount in the periodic declaration for February 2027, to be submitted by 20 April 2027, and make payment by 25 April 2027.
• In this case, the cash accounting scheme only deferred exigibility for 12 months. If the credit becomes definitively irrecoverable, the company may have to follow the procedures for regularisation of VAT on doubtful or irrecoverable debts, as per Article 78 of the CIVA, to recover the tax paid to the State.

The deadlines for submitting the periodic VAT declaration and the respective payment remain the general ones, i.e., by the 20th and 25th of the second month following the period to which the tax refers, respectively (see the 2026 VAT calendar).

Eligibility Requirements and Operations Excluded from the Scheme

Adherence to the cash accounting VAT scheme is not universal and is subject to a set of strict conditions, established in Decree-Law no. 71/2013, of 30 May, and subsequent amendments. It is essential that companies carefully assess whether they meet these requirements before considering adherence.

3.1. Requirements for Adherence

• Annual Turnover: The main requirement, and the most recently amended, is that the company's turnover in the previous calendar year cannot exceed €2,000,000. This limit, as mentioned, was updated by Decree-Law no. 34/2025, of 15 May. Turnover is calculated based on taxable and exempt operations without the right to deduction, carried out in the previous calendar year.
• Activity Seniority: The company must have its activity registered for VAT purposes for at least 12 months. This condition aims to ensure that only companies with some stability and tax history can access the scheme.
• Regularised Tax Situation: It is imperative that the company has its declarative and tax situation regularised, both in relation to VAT and other taxes. The existence of tax debts or missing declarations can prevent adherence.
• Not Under Article 53 Exemption Scheme: Companies that benefit from VAT exemption under Article 53 of the VAT Code (CIVA), due to having a turnover of less than €15,000 (value in 2026), cannot join the cash accounting VAT scheme. This scheme is intended for companies that are VAT taxable persons and that charge tax on their operations. For more information, consult the Complete Guide to VAT Exemption (Article 53).
• Not Under a Special VAT Scheme: Taxable persons covered by special VAT schemes (e.g., special scheme for small retailers, margin scheme, etc.) cannot join the cash accounting VAT scheme, except for legally provided exceptions.

3.2. Operations Excluded from the Cash Accounting VAT Scheme

It is crucial to note that not all operations carried out by a company that has joined the cash accounting VAT scheme benefit from its rules. Some operations are expressly excluded, which means that, for these, the general VAT scheme always applies.

• Imports and Exports: Import and export operations of goods and services are excluded from the cash accounting VAT scheme. VAT due on imports is settled at Customs, and exports are, as a rule, VAT exempt with the right to deduction, as per Article 14 of the CIVA.
• Intra-Community Operations: Intra-Community acquisitions and supplies of goods and services (i.e., transactions with European Union countries) are also not covered by the cash accounting scheme. These operations follow the specific rules of the intra-Community VAT scheme, established in the RITI (Scheme for VAT on Intra-Community Transactions).
• Operations with Reverse Charge (Self-assessment): Certain operations where the responsibility for charging and remitting VAT is transferred to the acquirer of the goods or services (the "reverse charge" rule or self-assessment), such as some construction services (Article 2, no. 1, point i) of the CIVA), or acquisition of scrap (Article 2, no. 1, point j) of the CIVA), are excluded. In these cases, VAT exigibility follows the general rules, regardless of adherence to the cash accounting scheme.
• Supplies of Goods and Services to Public Entities: Although the scheme is beneficial for those transacting with the State, supplies of goods and services made to public law corporate bodies are subject to special rules, and VAT may be due at the time of invoice issuance, regardless of receipt, if invoices are paid through the Centralised Payment System (Circular no. 1/2014 of the AT). However, Decree-Law no. 71/2013, of 30 May, establishes that in operations with public entities, VAT is due at the time of receipt, unless the payment term is less than 90 days and the invoice is issued with VAT included. This is a point that requires careful analysis.

The exclusion of these operations implies that companies under the cash accounting scheme will have to manage two VAT schemes simultaneously: the cash accounting scheme for covered operations and the general scheme for excluded operations. This increases administrative complexity and requires strict control by the accounting department.

The Counterpart: Deduction of Input VAT Conditioned on Payment

The cash accounting VAT scheme is designed based on the principle of symmetry. Just as the exigibility of VAT on sales is deferred until the time of receipt, the possibility of deducting input VAT on purchases and expenses is equally conditioned on the time of its actual payment to suppliers.

Article 3 of Decree-Law no. 71/2013, of 30 May, clearly states that "the right to deduct tax on acquisitions of goods and services [...] arises at the time of payment, total or partial, of the respective price". This means that a company under the cash accounting scheme cannot deduct the VAT from a purchase invoice in the period in which it receives it, but rather in the period in which it makes payment to the supplier.

4.1. Practical Implications of Conditioned Deduction

• Reverse Cash Flow Management: If the main objective of the cash accounting scheme is to relieve cash flow from credit sales, the symmetry in deduction can negate part of that benefit for certain companies. A company that, for example, sells for cash (like a retailer or a restaurant with over-the-counter sales) but pays its suppliers with extended terms (60 or 90 days), may actually be in a worse situation. It would lose the immediate deduction of input VAT (which it would have under the general scheme) without obtaining any significant gain in the exigibility of sales VAT (which it already receives for cash).
• Cash Flow Analysis: The decision to join the cash accounting VAT scheme must, therefore, be preceded by an exhaustive analysis of average client payment terms and average supplier payment terms.
  • Typical Beneficiaries: The scheme primarily benefits companies that sell on credit and pay for cash or on short terms. Examples include B2B (business-to-business) service providers, State suppliers (known for their extended payment terms), construction companies, and consultancies, where projects can have long billing and payment cycles. In these cases, the deferral of VAT exigibility on sales far outweighs any deferral in the deduction of input VAT.
  • Potential Disadvantaged Parties: Companies with a profile of quick receipts and slow payments (e.g., retail with stock, which receives for cash but negotiates extended payment terms with suppliers) may see their cash flow negatively affected by the conditioned deduction.
• Administrative Control: This rule requires more precise administrative control. The company will have to associate each payment with a specific purchase invoice to determine the deductible VAT in each period. Management and accounting software will need to be prepared to handle this complexity.

4.2. Numerical Example of Conditioned Deduction

A company under the cash accounting VAT scheme receives a purchase invoice for goods on 5 February 2026, for €5,000.00 + VAT (23% = €1,150.00). The payment term agreed with the supplier is 90 days, and payment is made on 6 May 2026.

• Under the General VAT Scheme: The VAT of €1,150.00 would be deductible in the periodic declaration for February, to be submitted by 20 April 2026. The company would recover this amount from the State (or offset it against VAT payable) before actually paying it to the supplier.
• Under the Cash Accounting VAT Scheme: The VAT of €1,150.00 only becomes deductible on 6 May 2026, the date of payment to the supplier. The company would include this amount in the periodic declaration for May, to be submitted by 20 July 2026.

This example highlights the importance of a strategic analysis before adherence, weighing the overall impact on cash flow resulting from both receipts and payments.

Comparative Analysis: Advantages and Disadvantages of the Cash Accounting VAT Scheme

The decision to join the cash accounting VAT scheme should be an informed choice, based on a careful analysis of its advantages and disadvantages, and the specific impact it will have on the company's cash flow and administrative management.

In summary, the cash accounting VAT scheme is a double-edged sword. While it offers substantial cash flow relief for companies that sell on credit, its symmetry in deduction and the associated administrative complexity require careful evaluation. Before joining, it is essential that the company simulates the real impact on its cash flow, considering its average payment collection and payment terms, as well as the volume and type of operations covered and excluded.

Adherence and Exit Process from the Scheme: The October Window

Adherence to the cash accounting VAT scheme is an annual process and has a specific period for formalisation. The decision to join or exit the scheme must be made in advance, given the restricted time window for communication to the Tax and Customs Authority (AT).

6.1. How to Join the Scheme

• Window of Opportunity: The option for the cash accounting VAT scheme is exercised during the month of October of each calendar year. This is the only window available to communicate the intention to join for the following year.
• Adherence Location: The formalisation of adherence is done exclusively through the Tax Portal (Portal das Finanças). The taxpayer or their certified accountant must access the services area and select the option related to the change of VAT scheme.
• Effects of Adherence: Adherence made in October takes effect from 1 January of the following calendar year. For example, anyone wishing to apply the cash accounting VAT scheme in 2027 must formalise their adherence in October 2026. If this window is missed, the company can only consider joining in the following year (October 2027 for effects from January 2028).
• Prior Analysis: Before formalising adherence, it is imperative that the company conducts a detailed analysis of its financial profile. This analysis should include:
  • Average client payment collection terms.
  • Average supplier payment terms.
  • The volume and proportion of operations covered and excluded from the scheme.
  • The capacity of the invoicing and accounting system to manage the specificities of the scheme (issuance of receipts, control of payments).

  This is an analysis that, for example, we perform in detail in the HVR accounting retainers, where, from €150/month (see prices), we help our clients optimise their tax and financial management.

6.2. Permanence and Exit from the Scheme

• Duration of Option: The option for the cash accounting VAT scheme is valid for a minimum period of 5 years, unless the taxable person ceases to meet the conditions for permanence. That is, once a company joins, it is, in principle, bound to the scheme for five years.
• Mandatory Exit: The company is automatically excluded from the scheme if, in any calendar year, it exceeds the turnover limit of €2,000,000. The exit occurs from the beginning of the tax period following that in which the exclusion condition is met. For example, if the limit is exceeded in August 2026, the exit will occur on 1 January 2027. Other causes of exclusion include cessation of activity or repeated non-compliance with declarative or payment obligations.
• Voluntary Exit: After the minimum period of 5 years, the company can choose to exit the cash accounting VAT scheme. The communication of exit follows the same procedure as adherence: it must be made on the Tax Portal during October, with effects from 1 January of the following year.
• Implications of Exit: In the event of exiting the scheme (whether mandatory or voluntary), the company must regularise the VAT related to invoices issued and not received, as well as unpaid purchase invoices that remain open. This regularisation is carried out in the periodic declaration for the first tax period in which the cash accounting scheme is no longer applicable, under the terms of Article 4 of Decree-Law no. 71/2013.

Invoicing and Receipts under the Cash Accounting Scheme: Specific Procedures

The application of the cash accounting VAT scheme imposes specific requirements both for issuing invoices and for documenting receipts. Compliance with these rules is fundamental for the fiscal validity of operations and to avoid problems with the Tax and Customs Authority (AT).

7.1. Requirements for Invoice Issuance

• Mandatory Mention: All invoices issued by a taxable person who has opted for the cash accounting VAT scheme must contain the clear and unequivocal mention "IVA – regime de caixa" (VAT – cash accounting scheme). This mention is crucial because it signals to the acquirer that the tax only becomes due on the date of actual receipt. For the client, this information is relevant because it affects the moment at which they can deduct the VAT themselves (if they are also a VAT taxable person). This requirement is provided for in Article 2, no. 1, point a) of Decree-Law no. 71/2013, of 30 May.
• Detailed Information: In addition to the mention, the invoice must contain all elements required by Article 36 of the VAT Code (CIVA), such as the date of issue, identification of the parties involved, description of goods or services, price, applicable VAT rates, etc.
• Certified Invoicing Software: It is essential that the invoicing software used is properly configured for the cash accounting VAT scheme. This ensures that the mandatory mention is automatically included in invoices and that the control of VAT amounts due is adequately managed. With the growing importance of Electronic Invoicing and SAF-T in 2026, the consistency and integrity of data between invoices, receipts, and the periodic VAT declaration will be increasingly automatically verified by the AT.

7.2. Issuance of Receipts and Documentation of Receipts

• Mandatory Receipt: At the time of receipt, total or partial, of an invoice issued under the cash accounting VAT scheme, the issuance of a receipt is mandatory. This receipt is the document that proves the actual receipt and, consequently, fixes the date of exigibility of the corresponding VAT. Article 2, no. 1, point b) of Decree-Law no. 71/2013, of 30 May, establishes this obligation.
• Receipt Elements: The receipt must be dated and sequentially numbered. It must also identify the invoice to which it refers, the amount received, and the amount of VAT included in that receipt.
• Internal Control: The company's accounting system must allow for the control and association of receipts with their respective invoices, in order to accurately determine the VAT that became due in each tax period.
• Partial Payments: In the case of partial payments, VAT becomes due proportionally to the amount received. Each partial payment must be documented by a receipt, and the corresponding VAT must be declared in the period in which the receipt occurred.

7.3. Impact on the Client (Acquirer)

For the client who acquires goods or services from a supplier under the cash accounting VAT scheme, the invoice with the mention "IVA – regime de caixa" implies that the deduction of input VAT is only possible at the time of payment of the invoice. Article 3, no. 2, of Decree-Law no. 71/2013, of 30 May, reflects this rule, establishing that "the right to deduct tax on acquisitions of goods and services [...] arises at the time of payment, total or partial, of the respective price".

This means that if a client receives an invoice with this mention, they cannot deduct the VAT in the period in which they receive the invoice. They can only do so when they make actual payment to the supplier. This rule is crucial for both sides of the transaction and requires that management and accounting systems are capable of handling this specificity.

Common Errors to Avoid in the Cash Accounting VAT Scheme

Despite the potential benefits, the cash accounting VAT scheme is complex, and its incorrect application can lead to tax penalties and cash flow problems. It is crucial to be aware of the most common errors to avoid them.

8.1. Failure to Validate Annual Eligibility

Error: Assuming that, once in the scheme, the company will remain eligible indefinitely. Consequence: The company may exceed the turnover limit (€2,000,000) and not exit the scheme in time, leading the AT to consider that VAT was incorrectly charged or deducted. How to Avoid: Annually monitor turnover and verify the maintenance of all eligibility requirements. Exit is mandatory in the year following the exceeding of the limit. Failure to exit in time can result in fines and compensatory interest.

8.2. Failure to Issue Receipts for All Receipts

Error: Not issuing a dated and sequentially numbered receipt for each receipt (total or partial) of invoices under the cash accounting scheme. Consequence: The AT may dispute the timing of VAT exigibility, demanding the tax earlier (based on the invoice date) and applying compensatory interest. The lack of receipts also makes it difficult to prove receipts in case of an audit. How to Avoid: Implement a rigorous system for issuing receipts, ensuring that each receipt is immediately documented. The invoicing software should be configured for this functionality.

8.3. Deduction of Input VAT Before Payment

Error: Deducting input VAT on purchase invoices in the period in which the invoice is received, instead of doing so in the period in which payment to the supplier is made. Consequence: Undue deduction of VAT, which the AT can correct, resulting in tax payable, compensatory interest, and fines. How to Avoid: Maintain detailed control of payments to suppliers and configure the accounting software so that VAT deduction only occurs after payment is recorded.

8.4. Application of the Scheme to Excluded Operations

Error: Applying the cash accounting VAT rules to operations that are expressly excluded from the scheme (e.g., imports, exports, intra-community transactions, reverse charge operations). Consequence: Incorrect charging or deduction of VAT, subject to correction by the AT and potential penalties. How to Avoid: Know in detail the list of excluded operations and ensure that these are treated according to the rules of the general VAT scheme. Accounting must be able to clearly distinguish these operations.

8.5. Failure to Include the Mention "IVA – Regime de Caixa" on Invoices

Error: Issuing invoices without the mandatory mention "IVA – regime de caixa". Consequence: The invoice may be considered invalid for the purposes of the cash accounting scheme, and VAT may be considered due on the invoice date. Furthermore, the client may have difficulty deducting the VAT. How to Avoid: Configure the invoicing software to automatically include this mention on all invoices issued.

8.6. Unawareness of the "12-Month Limit"

Error: Assuming that VAT on an invoice issued under the cash accounting scheme will never be due if the client does not pay. Consequence: Surprise at the exigibility of VAT 12 months after the invoice issuance, even without receipt, which can generate an unexpected cash flow difficulty. How to Avoid: Monitor outstanding invoices and be aware that, after 12 months, VAT becomes due. Plan cash flow for this eventuality or initiate procedures for regularisation of irrecoverable debts in time (Article 78 of the CIVA).

8.7. Failure in Managing Partial Payments

Error: Not correctly managing VAT in case of partial payments, either by not issuing receipts or by not declaring VAT proportionally. Consequence: Irregularities in the VAT declaration and potential dispute by the AT. How to Avoid: Ensure that the software and internal procedures allow for the recording and control of partial payments, with the issuance of the respective receipt and the declaration of VAT in proportion to the amount received.

Frequently Asked Questions about Cash Accounting VAT

What is the threshold for the cash accounting VAT scheme in 2026?

The annual turnover threshold for adherence to the cash accounting VAT scheme is €2,000,000. This value came into force on 1 July 2025, as per Decree-Law no. 34/2025. It is important to note that the old limit of €500,000 is outdated and should not be considered.

When and how can I join the cash accounting VAT scheme?

Adherence to the cash accounting VAT scheme must be done during the month of October, through the Tax Portal (Portal das Finanças). The option takes effect from 1 January of the following calendar year. For example, to apply the scheme in 2027, adherence must be formalised in October 2026.

What if the client never pays the invoice? Is VAT always due?

Yes, VAT always becomes due, at the latest, 12 months after the invoice issue date, even if the client has not made payment. This mechanism is known as the "12-month limit" and aims to prevent unlimited deferral of the tax. If the credit becomes irrecoverable after this period, the company may have to follow the VAT regularisation procedures provided for in Article 78 of the CIVA.

Can I deduct input VAT on my purchases normally, as under the general scheme?

No. Under the cash accounting VAT scheme, the deduction of input VAT on purchases and expenses is only permitted at the moment the company actually pays its suppliers. This is a rule of symmetry of the scheme, which benefits companies that sell on credit and pay for cash, but can harm those that receive for cash and pay on credit.

What mandatory mention should invoices issued under the cash accounting scheme have?

Invoices issued by taxable persons under the cash accounting VAT scheme must obligatorily contain the mention "IVA – regime de caixa" (VAT – cash accounting scheme). Furthermore, at the time of receipt (total or partial) of the invoice, it is mandatory to issue a dated and sequentially numbered receipt, which documents the payment and fixes the exigibility of the tax.

What are the main advantages of joining this scheme?

The main advantages include improved cash flow management, as VAT is only remitted after receipt; initial protection against default, by deferring exigibility; and cash flow relief for companies with long payment collection terms. The new threshold of €2,000,000 has significantly expanded the range of companies that can benefit.

What are the main disadvantages or risks?

Disadvantages include the conditioned deduction of input VAT (only after payment); increased administrative complexity to control receipts and payments invoice by invoice; the "12-month limit" which requires VAT even without receipt; and the exclusion of certain operations (imports, exports, intra-community), which continue to follow the general scheme.

What happens if a company exceeds the turnover limit?

If a company under the cash accounting VAT scheme exceeds the €2,000,000 turnover limit in a given calendar year, it is automatically excluded from the scheme from 1 January of the following year. The company must then regularise the VAT on outstanding invoices and unpaid purchase invoices in the first periodic declaration in which the cash accounting scheme no longer applies.

Conclusion: The Cash Accounting VAT Scheme as a Strategic Tool for Portuguese SMEs

The cash accounting VAT scheme, now with a threshold of €2,000,000 in annual turnover, represents an invaluable strategic treasury management tool for the vast majority of Portuguese Small and Medium-sized Enterprises. By aligning VAT exigibility and deduction with real financial flows, this scheme allows companies to manage their working capital more effectively, mitigating the challenges posed by long payment collection terms and the need to advance tax to the State.

However, adherence to this scheme should not be seen as a trivial decision. Its symmetry in the deduction of input VAT, increased administrative complexity, and excluded operations require a deep and personalised analysis. A company that sells on credit and pays for cash will, invariably, be a strong candidate to benefit from the scheme. Conversely, a company that receives for cash but pays on long terms may see its benefits nullified or even turned into disadvantages.

The October window for annual adherence is a critical period that requires planning and rigorous evaluation. It is the time to simulate the real financial impact, consider the capacity of management and accounting systems to handle the specificities of the scheme, and ensure that all legal requirements are met. Non-observance of the rules, such as the issuance of receipts or the mandatory mention on invoices, can lead to tax corrections and penalties.

The increase in the threshold is an open invitation to many companies that, in the past, could not benefit from this. It is an opportunity to re-evaluate tax and financial strategies. It is strongly recommended that, before making any decision, the company seeks specialised advice. A Certified Accountant with experience in tax management can carry out a feasibility study, projecting cash flows and the impact of cash accounting VAT on the company's liquidity, ensuring that the chosen option best serves the interests and financial health of the business.

Don't miss the October 2026 window to optimise your cash flow in 2027.

Want to know if cash accounting VAT improves your cash flow before the October 2026 window? Speak to Hugo Ribeiro, Certified Accountant OCC nº 64356 — HVR Business Consulting, Parque das Nações, Lisbon · +351 965 463 618. Our team is prepared to help you make the most informed decision for your business.

Sources and Legal References

• Decree-Law no. 71/2013, of 30 May: Establishes the cash accounting VAT scheme.
• Decree-Law no. 34/2025, of 15 May: Amends Decree-Law no. 71/2013, of 30 May, raising the turnover limit to €2,000,000.
• Value Added Tax Code (CIVA):
  • Article 2, no. 1, points i) and j): Reverse charge rules in certain sectors (e.g., construction, scrap).
  • Article 14: Exemptions on exports.
  • Article 36: Mandatory elements of invoices.
  • Article 53: VAT exemption scheme for small retailers.
  • Article 78: Regularisation of doubtful or irrecoverable debts.
• Scheme for VAT on Intra-Community Transactions (RITI): Regulates intra-community operations.
• Circular no. 1/2014, of 2014-01-09, of the Tax and Customs Authority (AT): Clarifications on the cash accounting VAT scheme, particularly in operations with public entities.